On November 17, the People's Bank of China, the General Administration of Financial Supervision, and the China Securities Regulatory Commission jointly held a symposium on financial institutions to study recent key tasks such as real estate finance, credit investment, and debt risk mitigation on financing platforms. Huang Wentao, chief economist at CITIC Construction Investment Securities, said that the joint meeting of the three departments once again made it clear that real estate companies with different ownership systems should be treated equally to meet the reasonable financing needs of real estate companies with different ownership systems, reflecting the supervisory authority's next step to firmly support real estate companies' reasonable loans and equity debt financing. It is expected that the strength and breadth of subsequent policy implementation will increase, which will greatly benefit the real estate supply side to get out of trouble faster. Related concept stocks: Sunac China (01918), China Resources Land (01109), Yuexiu Real Estate (00123), Longhu Group (00960).

According to statistics from the Securities Times Network, in terms of equity financing, since the end of last year, 8 refinancing and mergers, acquisitions and restructuring projects for domestic and foreign listed housing enterprises have been registered or filed by the Securities Regulatory Commission. The proposed total financing amount is about 44 billion yuan; a pilot real estate private equity fund has been launched.

In terms of bond financing, in January-October of this year, housing enterprise corporate bonds and asset-backed securities were issued more than 230 billion yuan. Increase credit to support private housing enterprises in issuing bonds through the “central-local cooperation” model between China Securities Finance Corporation and local guarantee companies. Furthermore, it completed the issuance and listing of the first batch of affordable rental housing real estate investment trusts (REITs) to promote the revitalization of existing assets. At the same time, the Securities Regulatory Commission has also increased its financing support for constructing a new model of real estate development.

Guojin Securities believes that frequent statements by the supervisory authorities indicate their determination to continue maintaining the stability of key financing channels such as credit, bonds, and equity for housing enterprises. It is expected that in the future, financial institutions' support for real estate industry financing will increase, and more financial policies to support real estate are expected to be implemented. Supply-side financing support is conducive to easing the current credit contraction problems and cash flow pressure of housing enterprises, boosting market confidence, and promoting the return to stable development of the real estate industry.

It is worth noting that on November 20, Sunac China issued a notice announcing that all conditions for overseas debt restructuring have been met, and that it officially came into effect on the same day. This means that Sunac became the first major housing company to complete all domestic and foreign debt restructuring processes.

With the restructuring taking effect, creditors' existing debt of about 10 billion US dollars will be replaced with new notes, mandatory convertible bonds, convertible bonds, and Sunac Service shares, at prices of 5.7 billion US dollars, 2.75 billion US dollars, 1 billion US dollars, and 775 million US dollars, respectively. With the complete restructuring of domestic and foreign open market debt, Sunac has resolved the overall debt risk of about 90 billion yuan.

Recently, the intensive release of favorable policies in the real estate market is expected to promote the steady recovery of the real estate market. In this context, the housing enterprise debt conversion process is once again speeding up. Yan Yuejin, research director of the Yiju Research Institute, pointed out that regardless of the size of Sunac China itself in the real estate market or the debt problem, its influence has attracted attention from within and outside the industry, so Sunac's resolution or breakthrough in China's debt problem is of industry benchmark significance.

Furthermore, according to the Financial Association, relevant sources from several major state-owned banks told reporters that the above conference proposed “three no less”, that is, the growth rate of each bank's own real estate loans should not be lower than the average real estate loan growth rate in the banking industry, the growth rate of public loans to non-state-owned housing enterprises should not be lower than the Bank's real estate growth rate, and the growth rate of personal mortgages to non-state-owned housing enterprises should not be lower than the bank's mortgage growth rate. The conference also proposed revisions to development loans, operating property loans, personal housing loans, etc.

According to another source, regulators are currently drafting a white list of Chinese real estate agents. It is possible that 50 state-owned and private housing enterprises will be included, and the listed enterprises will receive support from various sources, including credit, debt, and equity financing. This list has expanded the scope of systemically important high-quality housing enterprises compared to the beginning of this year.

In fact, since the end of last year, the central government has implemented a series of financing policies supporting real estate enterprises from the three aspects of credit, bonds, and equity, known as the “three arrows.”

According to Sohu Finance, at the level of “first arrow” credit to support the financing of housing enterprises, housing enterprises such as Vanke, Longhu, and Midea Real Estate, Greentown, Country Garden, CNOOC, Binjiang Group, China Merchants Shekou, China Resources Land, Jindi, Huayu, C&D Real Estate, Poly Development, and OCT were selected.

At the level of “second arrow” to support housing enterprise debt issuance and financing, the Dealers' Association and China Bond Increase Corporation have postponed the expansion of credit issuance and debt issuance to support private enterprises in issuing bonds for financing. Companies such as Vanke, Longhu, Midea Real Estate, Xincheng Holdings, Jindi, Xuhui, Greentown, and Jinhui applied for shelf registration and distribution.

At the level of the “third arrow” to support the equity financing of housing enterprises, the Securities Regulatory Commission decided to adjust and optimize five measures in terms of equity financing, resume mergers, acquisitions, restructuring and supporting financing for listed housing companies, and resume refinancing of listed housing enterprises and listed housing companies.

Practitioners believe that the conference sent a positive policy signal, showing the firm attitude of the financial supervisory authorities to maintain the healthy development of the real estate market. Increased implementation of the “three arrows” (credit, bonds, and equity) will bring more capital to the real estate market, help stabilize market expectations, and promote the healthy development of the real estate industry.

Thanks to the gradual implementation of a series of adjustment and optimization policies and measures in the real estate sector since this year, there are signs of marginal improvement in China's real estate market. CITIC Securities said that the darkest hour of real estate risk has passed. Although it will still take time from “qualification restoration” to “industry recovery,” for vulture investors, real estate bonds with significant price differences have shown their participation value.

Open Source Securities believes that the current real estate support policy has changed from focusing on the demand side to a two-pronged approach between supply and demand, and from “insured projects” to “insured entities.” Housing enterprises with high-quality land storage, stable finances, resource endowments, and continuous improvement of product strength are expected to cross the cycle, seize the local auction window and actively adjust positions, and take the lead in benefiting from the recovery in industry sales in the future; at the same time, some local housing enterprises and contract construction enterprises are expected to benefit from the incremental opportunities brought about by the continuous promotion of urban village renovation.

Related concept stocks:

$SUNAC (01918.HK)$: On November 20, Sunac China issued a notice announcing that all conditions for overseas debt restructuring have been met, and it officially came into effect on the same day. Furthermore, in October, the Group achieved contract sales of about RMB 4.76 billion; the contract sales area was about 325,000 square meters, and the average contract sales price was about RMB 14,650 per square meter.

$CHINA RES LAND (01109.HK)$: As of October 31, 2023, the Company and its subsidiaries (groups) achieved a total contract sales amount of approximately RMB 27.58 billion, and a total contract sales floor area of about 1,060,300 square meters.

$YUEXIU PROPERTY (00123.HK)$: In the first 10 months, the company's cumulative contract sales amount (together with contract sales for joint ventures and joint venture projects) was about RMB 121.03 billion, up about 32.8% year on year. The cumulative contract sales area was about 3,721,500 square meters, up about 17.6% year on year.

$LONGFOR GROUP (00960.HK)$: By the end of October 2023, the Group had achieved a total contract sales amount of 151.67 billion yuan and a contract sales area of 9.103 million square meters. In October, it achieved a total contract sales amount of 14.05 billion yuan and a contract sales area of 847,000 square meters in a single month.

edit/ruby